Why Pay Private Mortgage Insurance (PMI)?

By
Mortgage and Lending

Private Mortgage Insurance (PMI) is required by most lenders when a borrower puts less than 20% down on a purchase loan. Paid for by the borrower, PMI not only protects the lender from foreclosure, it also enables many buyers to qualify for loans and purchase real estate when they couldn't have otherwise. On January 1st, 2007, legislation went into effect making PMI tax deductible for new borrowers whose personal adjusted gross income is $100,000 or less. This has created additional opportunities for many buyers to finance a more expensive home or, in some cases, to obtain a lower monthly payment, while reducing annual income taxes.

An alternative financing option that borrowers may also consider involves taking out two home loans concurrently. The second loan, commonly referred to as a "piggyback loan", can take the form of a traditional home loan or a Home Equity Line of Credit (HELOC). It supplements the borrower's funds to help them achieve a 20% down payment, eliminating the need for PMI. However, in most cases PMI can be cancelled once the accumulated equity has reached 20% of the home's value, while a second home loan will have to be paid back in full regardless. Factor in the new PMI tax benefit, and a borrower's monthly payment may actually be lower with PMI versus a piggyback loan scenario.

Choosing PMI is not a one-size-fits-all decision. It is my job to weigh my borrowers' long-term goals and to provide comprehensive solutions that clearly explain all of the pros and cons of each mortgage option available. It's a job I take very seriously.

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Location:
New Jersey
Groups:
Mortgages
Delaware Valley Region
South Jersey
All About Mortgages/Mortgage Networking
New Jersey & Pennsylvania -- Realtors/Loan Officers/Title Clerks/Real Estate Lawyers
Tags:
mortgages
equity
financing
heloc
pmi
mortgage insurance
private mortgage insurance
monthly payment

Post a Comment
Spam prevention
Spam prevention
Show All Comments
Rainmaker
1,051,778
June Piper-Brandon
Houwzer Inc - Baltimore, MD
Piecing Dreams One Home at a Time

Thanks for the great information and the options for alternatives to PMI.

Aug 29, 2008 07:52 AM #1
Rainer
24,868
Veronica DeCarolis
Weidel Realtors - Flemington, NJ

Thanks for writing. Veronica

Aug 29, 2008 08:12 AM #2
Rainer
91,662
Ted Komenda
Dunhill Group - Osterville, MA

Thanks for this post very informative...

Aug 29, 2008 08:23 AM #3
Rainer
108,048
Karl Peidl
Moorestown, NJ
Accredited Loan Consultant

Glad I can help.  I welcome suggests on any other mortgage related tpics you'd like to know more about.

Aug 30, 2008 07:53 AM #4
Post a Comment
Spam prevention
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainer
108,048

Karl Peidl

Accredited Loan Consultant
Ask me a question
*
*
*
*
Spam prevention

Additional Information